Sino-Belarusian cooperation not unique for the region

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April 22, 2016 18:38

On October 2nd, the Belarusian House of Representatives ratified a Sino-Belarusian agreement on the military forces, temporarily deployed for joint exercises and training.

Belarus has been consistently reinforcing its cooperation with China, reaching the level of strategic partnership in summer 2013. Strengthening Sino-Belarusian bilateral relations allows Belarus to overcome its excessive dependence on Russia, while there is no progress in Western policy. However, China’s cooperation with Belarus is not exceptional in the region as China also reaches out to other neighbours of Belarus.

Since 2011, following a failed Belarus-EU dialogue, Belarus has put stakes on China and created unprecedented favourable conditions for Chinese investment. At the same time, Belarus has long exaggerated the level of political cooperation with China, calling it a ‘strategic partnership’. However, the ‘strategic’ level of relations was possible only after Lukashenko’s seventh visit to China and occurred later than with other Belarusian neighbours. This summer, the parties signed a declaration on the comprehensive strategic partnership, as well as other agreements, inter alia, on cooperation in aerospace and defence technology.

On the one hand, rhetoric about the exceptional nature of Sino-Belarusian relations is used by Belarus for domestic consumption. Often, an excessive focus on relations with China enables Belarus to compensate for foreign policy failures, especially concerning Belarusian-European relations. On the other hand, by developing cooperation with China, Belarus hopes to make Russia jealous and, as a result, to win certain concessions as the Eurasian Union shapes up.

However, the relationship between China and Belarus is not unique in the region. Signed in 2001, the Good Neighbourhood, Friendship and Cooperation Treaty established a strategic partnership between China and Russia. A Joint Declaration on Strategic Partnership between Ukraine and China was signed in summer 2011, and Sino-Polish – in late 2011. ‘Comprehensive strategic partnership’ relations between China and the EU were established in 2003.

Military cooperation between Belarus and China is also not unique. It helps Belarusian military to make steps towards integration in the global security system. Belarus and China have held joint exercises and training in Belarus since 2011. The draft agreement on the status of China’s military forces in Belarus was signed in December 2012.

Thus, Sino-Belarusian relations, inter alia, in the military sphere, are developing in line with regional trends. Belarus seeks to improve cooperation with China by all means. However, the Chinese leaders do not treat their relations with Belarus as something special.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.